Jacob Hacker Urges Public Insurance Option As Part of Health Care Reform

By Andrew Cohen

When it comes to solving our national health care crisis, Berkeley Law’s Jacob Hacker is decidedly pro-choice—as in letting Americans choose between public and private insurance plans.

“A health care system that contains costs and drives value must include a good public plan if the broad goals of reform—universal coverage and improved value—are to be achieved,” he says.

Hacker, faculty co-director of the law school’s Berkeley Center on Health, Economic and Family Security (Berkeley CHEFS), released a report Wednesday titled “The Case for Public Plan Choice in National Health Reform.” A joint project of Berkeley CHEFS and the Institute for America’s Future, a Washington, D.C. nonprofit, it argues that offering a Medicare-like public plan is crucial to taming expenses and achieving worthy coverage.

With health insurance premiums more than doubling over the past 10 years, system reform is a top legislative priority for President-elect Obama. Hacker says public-plan premiums would be an estimated 23 percent lower than comparable private insurance—no small point with more and more Americans either uninsured or not adequately protected against soaring medical costs.

On Wednesday, Hacker joined Congressman Pete Stark (D-Cal.) and Institute for America’s Future co-director Roger Hickey in a media conference call to discuss his report. All three emphasized that public and private insurance each have distinct strengths and should co-exist on an even playing field. “It’s understandable why insurers don’t want to compete,” Hacker said. “But that’s not a good argument for not having competition between them, particularly if private plans can deliver better value as they claim.”

Hacker’s public insurance option mirrors conventional Medicare in that the federal government would manage it and pay private providers to deliver health services. Such a plan would be offered through a new national insurance exchange, alongside private plans.

Pushing a Health Care Hybrid

“This is not an argument for a universal Medicare program,” Hacker writes in his report, “but instead for a ‘hybrid’ approach that builds on the best elements of the present system—large group plans in the public and private sectors—while putting in place a new means by which those without access to secure workplace insurance can choose among health plans that provide strong guarantees of quality, affordable coverage.”

Stark, chair of the U.S. House Ways and Means Subcommittee on Health, said the public plan option will be a critical element in any successful proposal for health care reform.

“In the absence of a public plan that people could opt into, you’d have to so strictly regulate the other plans that in effect they’d all have to become public plans,” Stark said. “Right now…most private plans are poorly managed. They’re the General Motors of the medical industry.”

He added that he doesn’t expect the House to vote on a health care plan in the first 100 days of Obama’s Administration. “Everyone has to have their day in court and be able to comment,” said Stark, who is targeting the end of 2009 for new legislation.

Making the Case

Hacker’s report outlines several reasons why public insurance should be part of that legislation. First, he points to its track record in limiting costs while preserving access—between 1997 and 2006, spending increased 7.3 percent a year under private health insurance compared to 4.6 percent under Medicare. Hacker said the U.S. could save $46 billion a year by spending what other countries with mixed public-private systems spend on insurers’ administrative costs.

He also praised public insurance for having pioneered new payment and quality-improvement methods. As it stands now, Hacker believes private insurance has limited incentive to treat people with chronic and costly disease—even though they are most in need of innovations in treatment and care services. A public plan choice, he says, would spark competition while slashing costs.

“This would provide incentive for private plans that don’t exist in the current system,” Hacker said Wednesday. “It could help set a very high standard for these plans and encourage them to invest in long-term quality improvement and disease management.”

Widely published in scholarly journals and popular media outlets such as the Washington Post, New York Times Magazine, and New Republic, Hacker has become a key figure in developing a national health care reform template. His public insurance plan is embraced by Obama, incoming Secretary of Health and Human Services Tom Daschle, and Senate Finance Committee chair Max Baucus (D-Mont.).

According to Hickey, they are joined “by 160 members of the House and Senate, and that number is growing.” Not just on Capitol Hill, but throughout the country.

“Opinion polls show that Americans want choice among public and private plans,” Hacker said. “The proposal I’m putting forth basically lets Americans have their cake and eat it, too. They’d get to choose which plan is best for themselves and their family.”